With all the bizarre news coverage we see on TV today, don’t be surprised if US businesses continually stop, start, and stagger through the remainder of the year. Given the erratic trends in the stock market, the recent surge in bankruptcies, ongoing sporadic Covid-19 virus outbreaks, brewing tensions between the US and China, and the upcoming presidential election, it doesn’t take long to figure out that we all need to create well thought-out backup plans to adapt to these turbulent times.
One question you might be asking yourself… how could these events potentially impact my business?
One possible answer? Supply chain. Even with the most common fundamental approach to these crazy times, executive management can still get blindsided when production lines suddenly come to an abrupt halt due to a disruption in supply chain.
In my line of work, I supply durable regulatory compliant product labels to compressed gas cylinder manufacturers and producers that require aggressive lead times. I also help gas suppliers and distributors improve their production line efficiencies by introducing them to durable label substrates and adhesives that can be applied to their gas cylinders for outdoor storage and delivery in extreme temperatures. No matter the size of the company, I often see the same pain-points that relate directly to production time and material usage.
Most typically the issue is when a company uses JIT (Just-In-Time) inventory methods they can become too lean during supply chain disruption. Typically, when supply chain is running at 100%, this is an excellent way to handle inventory operations and production timing. But when delivery times can’t be accurately tracked and layers of additional delays begin to add up, on-time delivery metrics begin to break down.
Here are several best practice methods to plan when you’re up against delays from your cylinder and tank label supplier.
Best practice #1: Build-up inventory in case your vendor experiences supply chain delays
This sounds like common sense, but you would be surprised to know how many businesses I see that try to hold out. Whether they can’t afford to buy more inventory at that time or just don’t have the management experience, it’s a common mistake. So, if you need to order backup inventory how much should you order? The answer, at least enough so you can fulfill one to two production runs at your fill plant(s) is a common conservative backup model, but to allocate for either monthly or quarterly inventory is the best practice. The reason is that if your label supplier encounters their own problems that delay lead times, you’ll have a backup inventory that will give you time to proceed with your production and have time to find an alternative supplier. This also helps reduce costly rush fees.
What’s more, if any of your customers that haven’t ordered over the last few months suddenly place a large order, you’ll have immediate capacity to produce it right away. Obviously, this depends on how much inventory is managed at your company’s warehouse(s).
What’s interesting is that the ‘Goldilocks’ balance of how much to order is changing to a less lean inventory average since supply chain disruption began in Q1 2020. Meaning, while every gas supplier or distributor watches customer demand and tries to determine forecasts and inventory flow, supply chain disruptions can cause companies to decrease JIT orders and increase their overall inventory supply.
If you aren’t already allocating for additional warehouse space in temperature-controlled areas, your inventory costs can quickly sneak up on you. Keep in mind that your product labels not only represent regulatory compliance, but they can also represent your company brand, lot numbers, and tracking information of your tanks and cylinders. The main point here is, properly storing your product labels to ensure readability is extremely important and is often overlooked.
Best practice #2: Have a backup plan for using an alternative label if your supplier uses material from China
If your company is already running extremely lean, it’s never easy to allocate additional time to work on side projects until they become top priority. But if your production times continue to suffer delays due to lack of supply from China, one idea might be to immediately start testing other types of label materials that are readily available in the US. This may take additional time for you to approve the new material if you have an extremely busy regulatory compliance team (this might include your marketing and production management too). But, it is better to work through that rather than being completely shut down because your label supplier(s) can’t get the right materials that your teams originally approved.
If you’re a C-level executive and don’t have production experience, there’s an important factor to keep in mind. Always test new label materials, inks, and adhesives through your production lines and/or your label auto-applicators. This also includes testing your hand-applied labels too. Just making the decision to switch to a new label material without properly testing and not considering how it will affect production time can backfire at the worst time. In addition, if you decide to switch to another material that is easier to obtain in the US, you should expect demand will rise from others in the gas industry that may need that same material too. Place your orders sooner than later. Think about the potential ripple-affect.
Best Practice #3: Share your production calendar with your label supplier when possible
With so much automation in our lives today, it’s still important to have solid business relations with your label provider. If you’re using a label company that only offers an automated online order process, you may have very limited resources available. But your more experienced ‘solution based’ label converters will have a dedicated team and a preconfigured online 24/7 access portal that can help you avoid the headaches during supply chain disruption.
Understanding your customers’ annual seasonal demand for each specific type of gas and having a production and/or logistics schedule to share with your label account manager can help improve your long-term inventory operations. Keep in mind that label account managers usually know or have access to information about replacement materials that are best suited for your product’s surface and how the label is applied to your product (whether applied manually by hand or via auto-applicator).
What’s more, if your company is shifting to a completely different new type of cylinder, such as converting to a new lightweight tank to help minimize shipping costs, the surface of that new tank may require a different type of label adhesive in order to maintain its tact throughout its entire supply chain lifecycle. Realising that you may not be able to share much detail due to ‘new product’ confidentiality, any information you’re allowed to share with your label account manager will help them begin discussions with their suppliers to find the best alternative solutions.
Finally, sometimes businesses can experience unexpected inventory demand, especially when companies shift production to fewer plants or suddenly announce the acquisition of another company. And as most production managers know all too well, label shortages can greatly impact internal quality control and delay delivery times. Having a backup strategy in place to react to any supply chain disruption will help your label provider ship on-time so your production deadlines are met.
My goal for this article wasn’t to alarm you, but instead get you to think about how you can plan around future supply chain disruptions and avoid production delays without taking on excessive risk.
Although labels may seem like the smallest part of your production worries, it is still a key component of the overall final product.
About the author
Rob Freeman is the director of business development and marketing at Label Solutions Inc. He specialises in helping companies accelerate sales, monetise brand strategies, and improve customer loyalty. Rob’s articles and comments have been published in a variety of online industry publications. He can be contacted at email@example.com